Convertible Life Insurance: Turning Term Into Permanent Life

If you bought term life but need whole life, your policy may give you the option to switch over.

A convertible life insurance policy is a term life policy that can be turned into a permanent life policy (such as whole life or universal life) after you buy it, without needing to answer health questions or take a life insurance medical exam. A permanent life policy provides a payout to your beneficiaries no matter when you die. With term life, it's possible to outlive the policy.

Converting a term life policy is good for people who later decide they want permanent life but have health issues that would prevent them from qualifying for a new policy.

If you have convertible life insurance don't wait until the policy has almost ended to think about converting. A convertible policy may require conversion within a certain time window after buying the policy or before a specific age. You might only have a few years after buying the policy to convert it. Your policy paperwork will state what the deadline is.

Converting only part of the policy

Some insurers allow you to do a partial conversion, meaning part of your policy is converted to permanent life and the rest stays as term life insurance. The two parts must still equal the original face amount of the term life policy, though. For example, if you have a $1 million term life policy and convert $300,000 to permanent life, the other $700,000 remains term life.

Original age vs. attained age

If you convert, your agent will ask you what age you want to use: original or current age, called attained age.

Original age: If you convert based on your original age when you bought the policy, you'll pay a lump sum for back premiums and interest but your rate going forward will be lower. For example, if you bought the policy five years ago when you were 35, your rates going forward will be based on age 35. You're paying the insurer the difference between the term policy you bought and what you would have paid if you purchased a permanent policy.

Attained age: If you convert based on attained age, you'll pay more going forward but you won't have to pay a lump sum. For example, if you bought the policy five years ago when you were 35, your new rates will be based on age 40 and the new policy type.